Wednesday, March 19, 2008

Update on JRJC

Congratulations to our readers with live positions in JRJC! Our short thesis for JRJC remains in place. We have done a very thorough analysis of the micro elements surrounding JRJC as well as the macro economic environment in which JRJC is attempting to operate; neither bode well. We pointed out the difficulties in executing a subscription based business model and the lack of any barriers for competitors to enter. There are even companies that could offer for free the services that JRJC provides. Such a development would cripple JRJC shares. The macro scene hasn't been kind either. ISHARES FTSE/XINHUA China 25 Index (FXI) is about to print 8 month lows, so most of JRJC's subscribers are suffering losses in their investment portfolios.
Did you know that the Chinese cannot execute short positions? So a falling market means only one thing; losses. The FTSE/XINHUA is similar to the widely quoted U.S. Dow Jones Average of 30 stocks. We know "V" bottoms seldom occur in emerging markets, so we urge our readers to hold their short positions until a complete wash out occurs, or one of the Eleven Commandments is triggered (like the 4th one).
We remind our readers of CFO Wang's comments: "we have very aggressive growth goals". Wall Street doesn't take kindly to that kind of rhetoric if you don't systematically deliver home run quarters. We see this quarter being dismal on a number of metrics, but especially bottom line/earnings. SG&A costs rising faster than sales on a percentage basis will be an issue on the next live conference call no doubt. All these matters mentioned, micro and macro will be reflected in JRJC's share price in the coming days and weeks. We tell our supporters "it's better to under estimate & over achieve than over estimate and under achieve." Unfortunately CFO Wang has fallen into that dangerous trap, and now JRJC longs are ~trapped under ice~. Congratulations to our readers again, we will revisit JRJC next week March 26TH.
The Psychology of the Call team thanks you for your Wednesday attention.